WASHINGTON–The Trump administration plans to work with Congress to overhaul mortgage-finance giants
Fannie Mae
and
Freddie Mac,
a White House spokeswoman said Tuesday—playing down the idea the administration will seek to unilaterally release the firms from government control.

The White House also expects to announce a framework for developing comprehensive housing-finance changes “shortly,” White House spokeswoman
Lindsay Walters
said. But that framework will not likely make specific recommendations about what to do with the two companies, according to people familiar with the administration’s thinking.

For more than a decade, lawmakers have tried without success to overhaul Fannie and Freddie, which were placed in conservatorship during the 2008 financial crisis. Recent statements by administration officials indicated the government was reviewing plans to directly end government control without input from Congress, sending shares surging.

Some hedge-fund investors have bet for years that the government would eventually recapitalize and release the firms from government control, in lieu of a technically complicated and politically contentious battle to overhaul the mortgage-finance system. Tuesday’s statement suggests that the administration wants to work with Congress, at least for now.

On Tuesday, Fannie and Freddie both declined sharply after the Journal story was published. Fannie shares closed down about 23%, with Freddie off about 22%, on a day when the stock market was largely lower.

Joseph Otting,
the acting head of the Federal House Finance Agency, said in a private meeting with agency staff earlier in January that the administration was preparing to end the conservatorship on its own. “The Treasury and White House viewpoint is that the [FHFA] director and the secretary of Treasury have tremendous authority and that they would act, I think, independent of legislation if they thought it was the right thing to do,” Otting said, according to a copy of the audio reviewed by The Wall Street Journal.

The comments surprised housing-policy experts, given the belief that Trump officials might act on their own. The experts had warned lawmakers might oppose the pending nomination of Mark Calabria to head the FHFA on a permanent basis—if the administration was seen as acting without consulting Congress.

The Senate Banking Committee is preparing to hold a nomination hearing on Mr. Calabria—a libertarian economist and aide to Vice President
Mike Pence
—as soon as February,

Senate Banking Committee Chairman
Mike Crapo
(R., Idaho) in a Tuesday statement said a housing-finance overhaul is his committee’s top priority. “Housing finance reform is the last piece of unaddressed business from the financial crisis,” Mr. Crapo said.

Mr. Otting, who also serves as comptroller of the currency, said a big part of the administration’s efforts would revolve around adequately capitalizing the firms. The companies currently operate with tiny capital buffers, but would need between $150 billion and $200 billion in capital to operate as fully private companies, he said.

“I think that’s going to take some really heavy lifting and thought processes around that,” he said in the meeting.

Fannie and Freddie are central players in the mortgage market, buying mortgages from lenders and packaging them for issuance as securities. The government effectively nationalized the pair in 2008 in a bid to stabilize the housing market as mortgage defaults mounted.

In return for injecting about $190 billion into the firms, the government created a new class of stock—senior preferred shares—that paid an annual 10% dividend, along with warrants to acquire nearly 80% of the firms’ common stock. The Treasury revamped its bailout agreement in 2012 to require nearly all the firms’ profits be swept away as dividend payments on those preferred shares. Investors filed suit over the change.